Saturday Rate of Exchange:
Are Corporate Taxes Immoral?

from Raymond

 
Libertarian Michael A. LaFerrara believes that corporate taxes are morally wrong. Last week we provided, without comment, a link to his argument.

Friend of the blog Trey began with a minor agreement, but took exception to most of Mr. LaFerrara’s libertarian view:

Trey::

I have rare agreement with Mr. LaFerrara; If we’re cutting taxes, it only makes sense that spending is also cut. 3 Trillion in tax cuts can’t be offset by freezing Federal discretionary spending, defunding The Arts, and pretending the military isn’t a part of the federal budget.

That being said; This dude’s rationale and opinion on corporates taxes is ridulously moronic… to the point that I HAVE to believe he knows he’s being intentionally obtuse.

The corporate tax is the poster child for double taxation.

A business corporation is not a person. It is an association of individuals who come together voluntarily for a productive mission. It is a legal and cultural framework for cooperation. It makes no more sense to tax a corporation than to tax a labor union or a chess club. The owners of the corporation are taxed at the individual level, to the extent they draw dividend income or earn capital gains or draw wages and salaries from the company. To tax a corporation is to tax the owners twice

Today I learned that a corporation is exactly the same as a chess club. Maybe we should also tax chess clubs if they benefit financially from the public infrastructure, education, utilities and stability of the society they reside in. I understand Mr. LaFerrara also has issues with public ownership of things, but that doesn’t take away from the point that corporations are taxed for the same reason people are taxed; We all benefit from the things our society has put into place for us to succeed and to protect us.

To Mr. LaFerrara society is like the office lunch pool. Everyone puts in five bucks and they all order pizza for lunch every Friday. Except in this scenerio Corporations are the ‘Steve from Accounting’ of the office. Steve never puts in five bucks, but still expects to have pizza for lunch like everyone else. Mr. LaFerrara is ok with Steve not putting his fair share and outright scorns Dianne in Marketing and George in Sales for insisting Steve put in his five bucks. He has no qualms with the office subsidizing Steve’s lunch but, for some reason, hates the idea of Steve pitching in. Like he’s not a part of the office.

Also; In every skree about taxation and the awfulness of collective society, how is Mr. LaFerrara living up to what his father totally, really did, I’m sure of it told him:

“Never worry about the next guy. Only worry about yourself”—Specifically, am I being treated fairly?”

He sure does a lot of worrying for anyone with an LLC at the end of their name.

Frequent contributor Ryan responded.

Ryan::

I don’t think that Mr. LaFerrara would accept your analogy. In reality, we don’t all pay the same amount ($5) for the same benefit (a slice of pizza) and Steve is just the name of a group of people who have already been taxed once (paid into the pool). Furthermore, tax rates are not and cannot be determined through some formula that accurately takes the “consumption” rates of infrastructure and other social benefits into account, so it is accepted that some people will consume more than others (take more than one slice) even if they don’t pay more for it. This is OK because, even after the big consumers are done, everyone else still has infrastructure and is free to do things like start a business (there is always leftover pizza available to those who originally just took one slice).

I don’t know if Mr. LaFerrara supports a flat tax because he believes that it is genuinely fair or because he believes that consumption-based taxation, while optimally fair, is impractical. But now we also know that he rejects “double taxation.” The practical effect of eliminating double taxation and a progressive tax system would be massive spending cuts, massive tax hikes for everyone besides the wealthy, or both. His unsupported “double taxation is immoral” declaration doesn’t convince me that the harm of the above effects is of lesser concern.

And that’s really the issue here. We bicker about what constitutes fair taxation (a flat sum? a flat rate? a progressive rate? how progressive?), but this misses the point. If we have already decided what we want to buy with our money and done so, then the primary goal of the tax debate must be to pay our bills, not to establish fair taxation. Large bills justify progressive taxation and other kinds of taxation (on products, activities, businesses, etc.) as a matter of necessity.

Until conservatives and libertarians can convince the country that we don’t need most of or the most expensive of our various agencies and programs and government employees, then any “fair” tax plans are fiscally irresponsible. They put the cart before the horse, just like current Republican tax proposals sold on the basis of the fantasy that tax cuts necessarily pay for themselves. I am tired of hearing about them.

Have a safe weekend.

1 thought on “Saturday Rate of Exchange:
Are Corporate Taxes Immoral?”

  1. I think it makes more sense to not tax people instead of not taxing corporations (and business in general). They already collect people’s taxes and turn them over to the government.

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